Hi, welcome to our Q3 presentation. We'll do this the same way as last time, with a presentation from CEO Bjørn Kjos and CFO Geir Karlsen. Then we'll turn to you for a Q&A, I will read out the questions sent to investor.relations@norwegian.com. Let's go ahead.
Good morning, everybody. Coming to third quarter. Go directly into the third quarter. As you will see, we have this quarter taken in 4 new MAXes and one Dreamliner, sold 8 NGs for deliveries this, as well as next year. EBITDA on NOK 2,266 million, up from short of NOK 2 billion last year. Most important flight was this year, our UNICEF flight went to Chad. Very well received, of course, touching to see how we can help all the children down there. Together with us was the Minister of International Development. Took the position as the largest non-U.S. airline serving New York this year. What we are very proud of is that we have been voted as the most fuel-efficient airline in transatlantic routes in a new report from International Council on Clean Transportation.
We took the first place last year as well, we are keeping the position. We have won a lot of awards also this year. World's best low-cost long-haul airline and best low-cost airline in Europe for the sixth year in a row. Other than that, a lot of awards, among them from Global Traveler and one named the four-star low-cost airline by APEX. The market received us very well so far. Load factor this quarter was 90.5%, very stable. We absorbed all the growth we put into the markets. We put in a lot of growth this quarter, 33%, it was absorbed by 32%. We are well satisfied that the market could absorb all the growth that we put into it. That resulted in 10.9 million passengers flown in the third quarter, up 11%.
We have 12 months rolling now on carrying 36.4 million passengers. We'll see. We have continued growth on all the airports. Short of a million over Oslo and half a million in Stockholm. Close to 400,000 in Copenhagen, around that in Helsinki. Our biggest growth was in the U.K., at Gatwick. We have slightly more than a million passengers. That's why, of course, we have a large number of Dreamliners now serving Gatwick. That is the result of this increase, also an increase on the Spanish bases. Interesting to see where our passengers are coming from. Although we have a growth in the Nordics as well on a 12 months rolling basis, 6%, our most significant growth now is from the U.S. As you see, departing passengers, it's almost the same as Norway now.
46% of our transatlantic passengers originate from the U.S. Outside the Nordics, it's more than 50%. We are very satisfied with the grip we have got on the U.S., and that's actually, as you can see, where we have the strongest growth. Today, we fly a network of more than 60 intercontinental routes. 55 on wide-body, actually, and 11 narrow-body. We have a huge network now, especially coming into New York. We have this year added 25 aircraft, and down from last year where we had 34 coming in. Of course, this year we have received MAXes and Dreamliners. Today we fly 158 aircraft and five aircraft on external leases. We are, as we speak, all the time redelivering older NGs, especially with the high lease cost. That also drive down the lease cost and drive down our cost all overall.
That will continue going forward. Going to the financial guy, you are the king of the financials.
Thank you.
I will just take you through the main items on the financials. On the top line, we're at NOK 11 billion. Ancillary is picking up nicely. I think it's approximately 10% from last quarter, NOK 1.9 billion. Other revenue includes the cargo income, which is also ticking up pretty nicely, 10% since last quarter. The other income also includes commission on board and then some services that we're actually selling to Boeing on our own aircraft of NOK 35 million. That's a small item, but an interesting one. On the cost side, I will come back to that more in detail. Other losses, gains, net this quarter is NOK 398 million profit. NOK 320 of that is realized profit on fuel hedges. The other one is NOK 64 million, which relates to a profit on the TRSs we are having on our shares in the Bank Norwegian. Net financial items, NOK 233.
NOK 290 of that is interest expense. We have a gain on euro dollar on the debt we have in euro, in the U.S. dollar companies. EBITDA of NOK 2.3 billion and an EBT of NOK 1.6 billion. Due to the issues that we have been talking about the last quarters on the Rolls-Royce engines, I would like just to mention that in addition to the kind of cost that we had on those issues. Outside what we expect to get compensated, we do expect to have a loss due to these issues of more than NOK 1 billion for the 2018 as a total. Meaning if it hadn't been for those problems, the long-haul business would have made at least NOK 1 billion more for the 2018 in total. On the revenue side, 33% year-on-year. RASK to NOK 0.40. It's an increase.
We have a little bit of help on the currency there. Again, ancillary revenue is coming up nicely. It's the same as the cargo. We expect that to continue going forward. On the cost side, year-on-year or compared to same quarter last year, we are down 10%. We have a little bit, 12% in constant currency. Even with fuel costs, we have a decrease in constant currency by 2%. This is a tendency that we will make sure that continues. On the fuel side, it's not really much we can do other than trying to hedge. I'll come back to that. The base cost in the company should continue to decrease. If you go a little bit more into the details on the cost side, a few comments to that. The fuel price is tough. It's hurting us.
You could say in hindsight, you should have been more hedged. Yes, but it is what it is. We have been trying to play this a little bit smart during the last months, meaning that we have tried to hedge a little bit more than we have seen the dips going downwards on the fuel price. Fuel price is obviously a tough one. Handling cost is also up with some percentages. A lot of that relates to the care and compensation that we have to pay to our passengers due mostly to the issues that we have on the engines, on the 787s. Higher technical cost is a little bit of an accounting effect because we have a higher portion now of 787 and MAXs on what we call total maintenance deals.
Which means that you will take a higher portion of your maintenance straight through your P&L compared to taking as a part of the aircraft and depreciating that over time. All in all, I would say that the tendency, the trend on most of the cost lines is trending downwards. I just included a fuel efficiency slide, which shows how many kilometers you're flying per passengers per liter jet fuel. It shows that we should be very competitive in that area compared to everybody else, really. Over to the balance sheet. Intangible assets is the deferred tax loss we have. That's reduced this quarter due to the fact that we have a decent profit. On aircraft and aircraft parts, NOK 31.8 billion. That's up from NOK 29.7 in last quarter. As Bjørn said, we have taken delivery of four MAXs and one 787. Payment on aircraft includes PDP.
It's NOK 4.3 billion on that is on the 787s, NOK 2.2 on the MAXs and NOK 1.8 on the NEOs. On investments, that includes our share, our stocks in the Bank Norwegian. It also includes approximately 600 million NOK in unrealized profit on the fuel hedges that we have on. Receivables. It includes the kind of holdbacks from the acquirers we have. As I told you last quarter, we are working to get more acquirers in order to give us capacity as a result of the growth. We have got two new acquirers during the quarter. It takes time to implement on the IT side, we expect that to give an effect during the current quarter and into the first quarter. There's also a significant amount included in this receivable that relates to the compensations that we have agreed due to the engine issues. That will turn into cash shortly.
That's part of the reason that you might have expected a little bit higher cash balance by the end of the quarter. That takes us down to an equity of NOK 5.3 billion, approximately 9%. On the debt side, we have increased the debt to NOK 33.4 billion, up from NOK 30.4 billion in the second quarter. Just a few comments on the cash flow side. We have paid NOK 3.3 billion in either taking delivery of aircraft or paying PDP, and we have then drawn on facilities of approximately the same. I've just included a slide here that I have mentioned the last couple of quarters that shows the blended average cost of our debt over time.
As I've said previously as well, the most costly debt we have is the debt that was taken on back in 2008, 2009 and 2010 and 2011, which relates to the sale leasebacks and the operating leases. All these operating leases will be redelivered, and we are already in the process of redelivering them. That's why we can say that the average cost of the debt in this company will come down almost regardless, as long as we redeliver these aircraft and we are not doing anything stupid when we are financing new aircraft that will be delivered. What this shows, it gives you a blend on what type of facilities that we have used over the time. It also shows you that the average cost of the debt in the company is going down, despite that we have an increase in LIBOR.
We expect that it will continue to come down in the quarters to come. CapEx. The CapEx is unchanged really from last quarter, both for 2018 and 2019. That does not include the aircraft that we are planning to sell during 2019. The focus is still and has been during the last months on reducing the CapEx, also to divest the so-called NGs. We have sold eight of them now during this quarter. All of them is sold either at book value or with a profit. We expect to repay approximately $130 million in debt at delivery of these aircraft. We are going to free up close to $70 million in free liquidity after repayment of debt. As I said, we have done all of them either at very close to book value or with a profit. Liquidity.
We have an undrawn facility that we have had for a while. We haven't done anything with it. On financing. I should also say that on reducing CapEx commitment, we will continue to sell the NGs, as we have said. I think hopefully we can come to the market with another transaction shortly. What I can also say is that we have been running a process for the last couple of months, two, three months now. What we could say is that we are in, what should I say, advanced discussions on a joint venture structure for part of the fleet. There's no guarantees in that. This is something that we have been working on for a while. The 2018 deliveries, they are secured. We have raised financing all of them.
We have a very high focus now on making sure that we have financing in place, at least for all deliveries for the first half of 2019. The aim is to be able to do that before the end of this year. We will continue to do the type of facilities with a low cost of capital, hopefully with a long repayment profile in order to take the cash break even on these aircraft as low as possible. I think I said in the second quarter that we were not looking to do any more sale leasebacks. I think we're actually going to do a couple of sale leasebacks in the fourth quarter. That's just because that market has really been tightening in.
Instead of the typical lease factors we have done previously at higher than 0.7, we are now able to do a few aircraft in the 0.6% level, which takes the cost of capital to a very competitive point, really. This is typically the transaction that you can do supported by the Japanese. That's the plan going forward. Outlook. If you look at the bookings as for today, what we are seeing is a slight increase in yield. Obviously, we are very curious to see how that affects the load during the next months, and for sure into the winter. The market is tough. The oil price is hitting us, definitely. That's the situation as it looks now. The growth in 2018 is 38%, slightly down from what we told you last quarter.
We expect the growth in 2019 to be between 15% and 20%, all depending on what we are doing with the divestments of aircraft, as I mentioned. On fuel hedging, what we have done there since last quarter is, I think last quarter we had, for 2019, 7% hedged at 648. Now we have 22% hedged at 663. If you look at the fuel price, I think it was approximately NOK 650 a ton 1st of July. Then it went all the way up to 770 just recently. Now it's down to 730s again. We are now able to hedge 2019 at around 710, which we have done the last days, really, and currently doing. We expect to take that percentage up slightly, at least during the fourth quarter.
On unit costs, we stick to the guiding ex-fuel, but we have to increase the guiding inclusive fuel, as I said. Hopefully, we could, during the next couple of quarters, have a look at the guiding, especially when it relates to ex-fuel. On the cost side, we have also started a program internally where we aim to have a significant saving. If you look at the cost base in Norwegian on the basis of the full year 2018, we have a cost base in the area of NOK 37.5 billion. If you look at the increase that we are going to have in 2019 in capacity, and you increase the costs at the same level as we have seen in 2018, you will have an increase in your cost base of approximately NOK 5 billion. So the NOK 37.5 billion will go up to NOK 42.5 billion.
What we are saying here, that will not happen. We expect that it will increase with NOK 2 billion less as a minimum. We have initiated a set of initiatives, and the NOK 2 billion is, what I would say, a minimum, and we are going to make it. Hopefully, we are going to do more than that. That is what we plan to say here today, and we do also plan to come back to you at later quarters with a more updated figure, and not at least what we have achieved at the time when we report back. Bjørn?
Okay. Thank you, Geir. Going forward, we are fully committed to deliver on the long-term strategy. I must say that we have succeeded on the long haul, and the long haul today would have been very good if it hadn't been for these engine problems that we have encountered that had a lot of strain on us. Not only it cost us a lot of money, as Geir said, more than NOK 1 billion is outside what we expect to get back from Rolls. They have a goal on having these engine problems fixed by the end of this year, by the end of December. We anticipate it might take longer. Within our company, we anticipate it will go both January and February. Rolls is having a date in November, December for that.
In our agreement with Rolls, they are going to put new engines on all our airplanes. Those we have got with the older engines. Entering a moderate growth phase, as you have seen, and we have a strong focus on cost reduction initiatives that Geir touched upon. What we are doing is actually, we are doing what we have already started, and that is the reason why we are implementing a cost reduction, and we have already been able to do that. It's a conservative figure that Geir showed up here for NOK 2 billion. We expect it to be more. We have secured the financing on the remaining deliveries in 2018, and we are in the process actually of securing deliveries into first half 2019. Continuing the fleet renewal program, where we are selling off the NG. NG is very attractive actually as we speak.
As we sold two of them yesterday evening, so they wanted actually more, but we couldn't take out more. It's very interesting to see if that Geir touched upon this program we have with also taking into a joint venture. We are in advanced discussions on a joint venture. The fleet renewal program will continue and it's very efficient airplanes that we are taking in, the MAXs and also the new Airbus aircraft, very efficient aircraft. Our growth for the next years on ASK as an average will be between 5%-10%, 3%-5% on narrow body operation. It depends on actually how many NG we will keep, how many we will sell. We have 108 MAX coming in and we have 115 NG, so that will not match. We have to keep some of our NG.
Our wide-body operation, so of course the growth of that will come down considerably, for the next two years and in 24 months or less than 18 months we are finished with the wide-body. Taking in more wide-bodies on the Dreamliners. That is what we intend to do going forward. Yes. We might open up for questions. Geir, you probably have to come up here, otherwise people won't hear you.
Any questions from the audience first?
Hi, good morning. Kenneth Sjøholt from Pareto. Just a few of them here. First of all, the cost program, is that including the engine issue you had in, you mentioned in 2018? Secondly, yields. With the rising fuel price, I guess you have to do something on your top line, but how easy is it actually for you to lift the ticket price? Is it more relevant to look at the ancillary or other things? That's the second one. The third one actually on the outlook for the winter seems quite rough for the industry, given your book equity. The equity market is at least concerned. Are you concerned for the winter? Thank you.
It depends on the oil price. If the oil price goes at $100, I think a lot of companies have to be concerned. What we have seen it trends downwards and that's very good. As for the time being, it looks quite fine, but you never know when going forward. One thing we know is that the cost will come down. That is for sure. We expect actually, this year we have, because of these engine problems, we have around 1 billion that we paid out in indemnification to our passengers according to EU 261. You will not see that next year. That's not taken into the count of the NOK 2 billion that we are saving. Not taking into account.
That's right. You could say that what it takes into account is that when you don't have these problems, you will also see an improvement in the on-time performance, especially on the 787s. By having this low on time as we're having today due to the problems, it has costs involved obviously. In that sense, you could say that we expect to have savings in that area. It doesn't take into effect that because we have a kind of an agreement with Rolls-Royce and Boeing on how we should move forward with these issues now until they come to an end. We are really struggling on low on time, and which then gives all these compensations to the customers through 2019, NOK 1 billion.
What I said earlier that, and that is on top of the kind of compensations that we can expect from the two parties.
Just a follow-up on the reimbursement. You mentioned that the reimbursement is not yet included in the balance sheet. Will it provide any-
-impact on the equity as well when it's provided?
Well, it first of all give an effect. It depends on what kind of agreements that we can do with them from now going forward, depending on how long these problems will continue. First of all, it will be giving an effect on the cash position as such in the company. If you look at the receivables number, for example, that includes a significant portion of the compensation that we have agreed with the two, which will turn into cash.
Yield question or ticket price, how easy is for you to change the ticket price in this environment with a slightly over capacity in Europe?
I can answer on that. During a winter season, it's obviously most of the airlines will run out of their hedges. We are well ahead of them on the fuel consumptions. In that respect, from our fleet, we have a 20% advantage just in the fleet of the fuel burn. That's actually the best hedge you can have going a long time forward. There is no way that the airlines can continue, especially those with the lower end of the table. They are using a lot of fuel. There's no way they can continue without increasing the prices. Whether it takes one month, two months, or three months, I shall not say what the timeline will be, but they definitely have to increase the prices.
James Hollins from Exane. Which new transatlantic routes in 2018 have performed better or worse than expectations? The second question, what's the split between short-haul and long-haul growth capacity in 2019?
Well, on the first, of course, we don't say what we earn and not earn on the transatlantic routes, on what route is best. You don't need to be Einstein to understand where we fly most, we have the best return. It's highly likely that where we fly with highest frequency, it will be the best return. Geir, anything to add on that?
Not really.
The split short- or long-haul?
I think we actually told. I think it was one of Bjørn's slides that gave the expected growth on that for 2019. It's actually included.
From Andrew Lobbenberg from HSBC. Can you explain the broad concept of what you mean of a JV divestment of fleet?
Well.
What we are seeing now is that we have been selling now eight NG's. What we can say is that the market out there for selling aircraft is, I would say, pretty good. On some transactions it takes time, as it did with the one for the six aircraft. The last one for the two that we sold last night was done in, I think it was six weeks. I think what's important is to find the smaller companies that can buy aircraft. They're normally willing to pay a little bit more. The two last ones, they are going to China and going to be operated in Pakistan. That's the type of transaction that we will look for on the NG's because they just pay better. On the JV, this is a process that just has been going on for a while.
The only thing we can say now that it's in advanced discussions and hopefully we can come back with more firm feedback shortly.
I can also add that's obviously interesting to put aircraft that we want to use ourself also into the JV. The JV is a very interesting concept that we are in advanced discussion with.
What I can say in addition is that obviously we are looking for a partner that has significant capacity in order to contribute with capital, not only to invest equity into a JV, but also to be a factor when it comes to financing of the same aircraft.
One more question from Andrew Lobbenberg. You've been cutting narrow-body transatlantic flying. Isn't the concept working?
It's working where you don't have the high APD. Actually, the high APD like you have in Scotland, that means the taxes on every passenger have to pay. When you fly a narrow body on a low-cost regime, that's very hard to get it to work. Outside where you don't have the high taxes, it works very good.
Daniel Röska from Bernstein. Can you give us more detail on your plans for debt financing next year?
Yes. I think as I said, we are focusing on doing the asset type of deals with a low cost of capital. They tend to give us 80%-85% leverage. We are also looking into doing more financial leases, especially in China. They have a very competitive cost of capital as well, and very long repayment profiles. I think that could be a mix that we can bring into our balance sheet going forward. It will be the low-cost capital transaction that we will aim for, definitely.
Any more questions from the audience?
Hans-Egil Nevnas from Widerøe. Looking into your ancillary revenues, as the pressure on fares is expected to continue during the winter months as capacity increases in Europe and also on the North Atlantic. Your growth on ancillary so far to this year is really good, even more than Ryanair. We see now that what we see on Ryanair is changing the concept of carry-on luggage. They're going to charge for that for all types of fares. Norwegian still is very liberal on that all fare types can bring carry-on luggage. Do you have any plans to change that, to start charging for carry-on luggage?
I cannot say it straight out. Obviously we are looking at not doing that, but taking different charges of how much you carry on when you travel. We are looking into it. On the most interesting part, actually, what we are looking into is on the cargo side, because that's really, as you saw, we have a 97% spike on the cargo side. That's incredibly interesting, and we will move some of our aircraft, especially out of London and Paris as an example, from Fort Lauderdale into Miami. Because they have to refurbish the airport there. That will hike up the revenues on the cargo side. We are looking on different other concepts, and actually we have launched concepts on in-flight pre-order meals and so on, and that have been incredibly interesting.
We'll roll that out on all our flights on the short haul. That's actually very interesting. We have studied this, that you mentioned. It's an interesting concept. I don't think we're still ready for it.
Your competitors, they have between 40%-70% of the total ancillary revenue comes from this kind of fees on a carry-on luggage.
It's very interesting. We have seen that. We are actually attacking it so far from a different angle.
I also think on the cargo side, I think if we hadn't had to take in all these wet leases that we have done this year due to the engine issues, I think you will probably have seen even a more increase on the cargo side.
Wet leases have been very damaging. We try to get out of wet leases as soon as we can. Actually, to free up aircraft to prevent the wet leases. It's costly and it's damaging for our brand, and it's just shitty aircraft that you get out there. Didn't hear me saying that. Okay. Any further questions? No. Okay. I think that was it. Thank you.
Thank you.